Next year, that $13,000 limit on gifts is expected to increase to $14,000—an inflation adjustment required by law. The number isn't yet official—and won't be until later this year when the Internal Revenue Service will announce this and many other inflation adjustments.
When it comes to estate planning, it ultimately comes down to what the laws themselves provide. But fear not, not all questions of estate planning law come down to politics. For example, with no political posturing involved at all, the annual exclusion amount is set to rise for the first time since 2009.
The Wall Street Journal broke the good news as early as it could, in a Q&A entitled “Expect Gift Limit to Rise Next Year.” First, a caveat: it’s not the present lifetime exclusion of $5.12 million you can expect to see increase, as the jury is still very much out on that one. Rather, it’s the annual gift tax exemption presently set at $13,000.
Currently, you can exclude $13,000 per person per year, before ever reducing your lifetime exemption amount. Good news: that amount is set to adjust up to $14,000.
We await official numbers, but they should arrive later in the year. If and when the annual gift exclusion increases, this will bring a welcome bump in your wealth transfer opportunities.
If nothing else, the attention given to this uptick in the annual gift exclusion also may offer a wake-up call to the power of annual giving. Just think of what you can do for each of your loved ones with an annual gift of $14,000.
Likely your loved ones could use the extra assistance in these tight financial times, and you get the benefit of seeing their stewardship (or lack thereof). In fact, depending on whether they are wise or foolish with the gift, you can make adjustments to your estate plan accordingly.
Please visit our website for information on elder law and estate planning issues, and sign up for our free monthly e-newsletter. The archive on our website contains numerous blog posts on these legal areas as well.
Reference: The Wall Street Journal (September 29, 2012) “Expect Gift Limit to Rise Next Year”